This case study is prepared for Toyota Motor Corporation (TMC). Overall purpose of this document is to analyze and identify communication practices followed in the organization and to suggest recommendations on how it could have been handled during recall.
Scope of this study covers Toyota recall events started from 2002 till 2010. Geographical area covered is US, Europe and Japan. Major area of research is organizational communication. It does not cover Project or Quality management practices.
Sample Size: This report restricts to 2000 words and it is small sample to explain such huge financial crises.
Age of Data: Recall period is 2002 to 2010 which is old as compared to today’s date.
Method of Data collection: Data is collected from online resources. Toyota does not provide any communication channel to individuals.
Toyota’s recent efforts to become the top-selling automaker in the global market place might have led to some unfavorable changes in its supply chain management practices, as well as tarnishing some of the core values of the “Toyota Way”, which were partially responsible for the massive recall.
Toyota’s handling of the recall also reflected the unique “Japanese way” of managing crisis.
Toyota Motor Corporation is a Japanese car manufacturing company. It was founded by Kiichiro Toyoda in 1937 as a spinoff from his father’s company Toyota industries. Company name “Toyota” was derived from family name “Toyoda”. In Japanese language Toyoda is ten-strokes word while Toyota is eight-strokes count, which is associated with good fortune and wealth.
Toyota with their impeccable working philosophy set the paradigm for manufacturing industry. The culture and principles used by Toyota are explained in The Toyota Way handbook. Two main pillars of the Toyota production system are Respect and Continuous Improvement. Their core values were studied and implemented in various organizations across globe.
In the Toyota Way, it’s the people who bring the system to life: working, communicating, resolving issues, and growing together.”
Toyota Motor corporations emerged as world’s number one automobile company in 2008 skyrocketing their profits to $13.7 billion. Toyota’s quality, reliability and affordability left competitors far behind on market index despite 2007-08’s global recession.
During mid-2000, customers started complaining about the rapid acceleration. And the complaints kept growing every year. In 2010 company had to recall 9 million cars worldwide. Recall resulted in temporarily shutting down six assembly plants from North America and suspending some of the best-selling models like Camry. Cornelissen (2004, p.179). Total financial losses reached $2 billion and the image implications were unrepairable.
In early 2000, Toyota was on automobile industry leaderboard. In order to make more profits in short span, Toyota compromised their own quality principles. To increase productivity, Toyota started using same parts in various models causing complications. More number of cars been produced with similar parts in most of the models. During 2002 and 2003 some of the customers complained about unintended acceleration. US policeman along with his family mate with a horrific accident while driving one of the Toyota models. Unfortunately, none of them survived. Soon the news hit media and grab everyone’s attention. This was a trigger for a company to finally take actions on the complaints, but it was too late to respond.
TMC has global presence in around 170 countries and regions. They conduct business with 51 oversees manufacturing companies in 28 countries and regions.
However, during recall Toyota had their operation’s headquarter in Japan where all crucial decisions were taken. This central-powered communication approach often created delay in timely response. Which later identified as one of the major reasons for recall.
When criticism started pouring in and Toyota finally realized its effect on their business. Toyota collated different communication teams into one, stating that this will lead to single effective communication medium. This de-centralized approach however did not work well.
During the 1990s, Toyota began to experience rapid growth and expansion. With this success, the organization became more defensive and protective of information. Expansion strained resources across the organization and slowed response time.
Companies such as Toyota that have a rigid corporate culture and a hierarchy of seniority are at risk of reacting to external threats slowly. It is not uncommon that individuals feel reluctant to pass bad news up the chain within a family company such as Toyota.
Toyota’s board of directors is composed of 29 Japanese men, all of whom are Toyota insiders. As a result of its centralized power structure, authority is not generally delegated within the company; all U.S. executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United States is authorized to issue a recall. Most information flow is one-way, back to Japan where decisions are made.
Toyota’s organizational culture has a considerable degree of secrecy. Employees in US often joked that they feel like working with Central Intelligence Agency, as none of the internal decisions/news every reaches them.
Long before US recall reports, very first problem was identified in Europe, but other Toyota operation units ware not informed. This shows lack of relationship between differently located business units.
Understanding the communication style in Japan is one of the biggest challenges of doing business in Japan. Japanese prefer indirect, high context communication while US prefers direct and explicit context. In other words, Japanese often imply and infer rather than verbalize directly and they place a high importance on the impact of body language, paraverbal features, relationships, emotion and other non-verbal communication. Japanese will rarely say “no”. As a result, international organizations doing business in Japan are often left confused and struggle to achieve their business objectives.
For a few years, the company’s top-ranking U.S. exec, James E. Press, was able to establish Toyota Motor North America in New York as the de facto headquarters in charge of all U.S. operations. He even rose to become the only American on Toyota’s board of directors in Japan. But Press quit in 2007 to join Chrysler and he was replaced by a series of Japanese executives with less clout. With Press departure, Toyota lost its key bridge between management in Japan and various U.S. constituencies and its ability to respond rapidly when crises hit.
Not aware of handling complaints and improper response: When complaints started pouring in, Toyota did not know how to handle them. There was no dedicated Customer Support team. They answered all queries in a generic way as complaints are under investigation and will publish complete report after investigation.”
Confusing response: As officials were not sure about the cause of the errors, confusing statements were suggested with different conclusions such as,
Missing Assurance: External communication channels were not persuasive and none of the conclusions assured safety. This kept customers in fear and Toyota ended up losing its customer base.
Non-Cooperative Response: From 2002 to 2010 number of complaints were increasing. Toyota did not acknowledge or even tried analyzing the fault from their end. Rather they issued a No Defect Exist letter which was not liked by customers. Customers also found this letter irresponsible and non-cooperative.
Toyota US CEO TV interview: Every time Toyota leaders went public on TV channels Customers became more and more displeased. Their lack of empathy through words and body language kept audience annoyed. CEO seemed clueless of many events for entire interview. While the host was dictating through the various cases and complaints in the past, from CEOs expressions he looked completely unaware of most of them. He kept repeating two solutions and even then, he wasn’t confident. There was no sympathy or act of responsibility about the casualties that happened during recall.
CEO Toyoda has only compounded the crisis. When he finally held a press conference in Japan to apologize, he pointedly did not make a deep bow to demonstrate regret. In Japanese cultural terms, Toyoda’s bow was perfunctory.
In spite all the chaos, Toyota issued a new letter stating, “There is no better time to buy Toyota than now”, it’s a clear disrespect to customer’s feelings and their loyalty towards the brand.
In 1990s, when social media was non-existent, Toyota mainly used newspapers and television commercials for their ad-campaigns and promotions. However, their external communications were always a point of concern.
And the legacy continued even after crisis. Below Fortuner ad was highly criticized by watchdog audience.
Earlier during recall, customers reported issues using a helpline. Although helpline seems most convenient, but it lacks real-time response. Twitter and Facebook founded in mid 2000s and till then there were no real-time feedback channels available for Toyota customers.
In 2010, when global recall happened, Toyota Twitter page has only 1300 followers and there were limited tweets from communication’s team.
Japan attracted global businesses since WWII, but it was always difficult to develop relationships with Japanese. Cross-Cultural training programs can help understand different sides and build stronger bond.
Toyota needed to have an effective communication channel from both internal and external audience. Use of technologies such as Video Conference, Social Media Page to podcast/publish latest announcements or even a dedicated customer support team/forum for fast and effective communication.
Companies with global presence always have language barriers. Having a Liaison can help set ties across different geographical territories.
Toyota leaders need to understand the power of public presence and deliver better speeches that are informative, assertive, persuasive and empathizing.
MNCs need flat hierarchy with less middle level managers and Link pins so that data is not misinterpreted or manipulated while reaching one business unit to another.
Continuous Improvement means that we never perceive current success as our final achievement. We are never satisfied with where we are and always improve our business by putting forth our best ideas and efforts: we are keen to create better alternatives, question our accomplishments and investigate future definitions of success.
There are three building blocks shaping our commitment to Continuous Improvement:
Respect For People refers to our own staff as well as the communities and stakeholder groups that surround us and we are part of. We respect our people and believe the success of our business is created by individual efforts and good teamwork.
Respect – we respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust
Teamwork – we stimulate personal and professional growth, share the opportunities of development and maximize individual and team performance.
These elements combined define our corporate DNA, provide a way of operating that is recognized by each and every Toyota-member around the globe and enables us to sustain our success in the future.